MTD 2023 requirements for e-commerce businesses

MTD 2021 - woman lying on bed with laptop and notebook

Making Tax Digital (MTD) was originally discussed in 2019 but that was only stage 1 of the government’s rollout of the scheme that will eventually encompass all taxes. MTD 2023 requirements mean that if you have a registered VAT tax business, you must keep digital records and file your tax returns using compatible digital software.

The aim of the MTD initiative is to make it easier for all sides come tax season. It is heralded as a more efficient, more effective method of tax reporting that will remove inaccuracies while lightening the workload. If you join the MTD for the 2023/24 tax season you will be required to use software to record, submit, and finalise your business income. However, due to delays, the mandatory start date of Making Tax Digital has been pushed back to the April 2026 tax year.

What is MTD?

As a quick recap, the Making Tax Digital initiative states that all VAT returns need to be submitted through HMRC‘s new dedicated MTD system that will communicate directly with your accounting software. You will need to upload all transactions through accounts software that is “functional compatible software” such as Xero.

If you are still using spreadsheets, you can use approved bridging software to comply with the requirements, although we highly recommend you use dedicated software that is tailored to e-commerce to maximise your growth.

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Does MTD 2023 affect me?

MTD in 2023 will continue to only be a factor if you are VAT registered.  If you are unsure if your e-commerce business should register for VAT, check out this article.

MTD 2021 - woman at minimalist desk with laptop

MTD 2023 for VAT

If your e-commerce business is already VAT-registered and has a turnover of more than £85,000, you are now required to follow the requirements by keeping digital records and using software to submit your VAT returns.

If you are VAT-registered but your turnover is less than £85,000 (voluntary registration), you will have been required to follow the requirements for your first return since April 2022.

Any VAT-registered business that has failed to use MTD-compliant software to store business records and make submissions to HMRC are subject to fines and penalties.

The later MTD rollout date of April 2026, only applies to businesses, self-employed, and landlords who have an income above £50,000.

For more information on VAT, including whether your e-commerce business should voluntarily register for VAT, check out our complete guide to VAT for e-commerce businesses.

MTD for Income Tax

The date on MTD for Income Tax was also previously delayed to the following year and came into effect  6th April 2023 for all self-employed businesses with an income of over £10,000.

If the MTD scheme is not yet mandatory for your business you can still trial the software, and if you want to voluntarily take part, you can do so here.

Next Steps

If you would like assistance to move your accounting system to Xero to fulfil the requirements for MTD, our team can transfer your accounts seamlessly. For any queries relating to MTD, or anything else related to e-commerce accounting, get in touch with our team of friendly professionals.

The best time to start is now.

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